Microsoft unveils new Xbox in bid to lead home entertainment

Bloomberg NewsMay 22, 2013 

Microsoft Corp. Tuesday unveiled its first new Xbox in almost eight years, seeking to position the console at the center of games and home entertainment against a growing roster of competitors that includes Apple and Facebook.

The device is called Xbox One, Don Mattrick, president of Microsoft's Interactive Entertainment division, said Tuesday in Redmond, Wash., where he unveiled the product. The player, set to go on sale later this year, will use voice commands and motion sensing to recognize users and let them switch seamlessly between games, live TV and Skype video calling.

Microsoft, the top seller in U.S. consoles for more than two years, faces fresh competition from Sony Corp.'s PlayStation 4, set for release near year-end, and Nintendo Co.'s Wii-U, introduced last November. It also must fend off Apple, Facebook, Google and Amazon.com, which all offer an array of entertainment services, software and products.

"Team Xbox is on a new mission: design and build an all- in-one system to light up a new generation of games, TV and entertainment," Mattrick said. "It's the one system you're going to use and love everyday, the place where your games and entertainment come alive."

The company calls the new features "intelligent TV." Prices won't be revealed Tuesday, according to David Dennis, a spokesman. Games from the current model, which sells for $180 at Amazon.com, won't work on the new Xbox, Microsoft said.

The Kinect controller will be included with each Xbox, the company said, allowing Microsoft and developers to create products around the device's motion, voice and visual recognition capabilities. The Kinect will recognize users and show them a customized TV guide and a dashboard with the last five things they've done on the device.

Kinect has been improved to operate better in low light, the company said. It uses a custom chip developed in Microsoft's Mountain View, Calif., office and employs technology the company calls "time of flight" that

works by tracking the speed of photons bouncing off the user to a sensor.

The new machine is black and horizontally oriented. It is eight to 10 times more powerful than the Xbox 360 and will run on an 8-core system-on-a-chip processor from Advanced Micro Devices Inc. The Xbox One will include 8 gigabytes of random access memory and a Blu-ray disc player, the company said.

Shifts in the market, especially in mobile, are pressuring Microsoft to make the new Xbox capable of delivering more programming, entertainment and services, moving it further from video games.

U.S. retail sales of packaged video games fell 21 percent last year to $8.9 billion, according to researcher NPD Group, while revenue from games downloaded to computers and mobile devices rose 16 percent to $5.9 billion.

"This has to last them in the living room for four to 10 years," said Brian Blau, an analyst at Gartner Inc. in San Francisco. "They have to think about what's coming in five years and compete against the two generations of tablets which will come out during that time."

The company announced a strategic partnership with Electronic Arts Inc., the second-largest U.S. producer of video games. The Redwood City, Calif.-based game publisher will supply exclusive content from its soccer, football, basketball and fighting titles next year, Andrew Wilson, executive vice president of EA Sports, said at the briefing.

Microsoft said it plans to offer 15 exclusive games in the first year. The Xbox is one of Microsoft's better-performing businesses. Sales in the entertainment and devices unit, including Xbox, rose 56 percent in the third quarter ended March 31. Operating income totaled $342 million, compared with a loss a year earlier.

In fiscal 2012, revenue in Microsoft's Windows division dropped 3.4 percent, while the entertainment unit saw sales increase 7.6 percent.

Industry leadership is no guarantee of future success. In November 2005, when Microsoft took the wraps off the Xbox 360, Sony led in console sales, only to came up short with the PlayStation 3 after Nintendo's Wii upended the market with a motion-activated controller.

Nintendo has sold 41.2 million of its first-generation Wii players in the U.S., compared with 39 million Xbox 360 consoles and 24.2 million Sony PlayStation 3s, according to NPD Group Inc., the Port Washington, New York-based researcher.

This time Xbox comes in with 28 months of market-leading sales in the U.S., according to NPD, outgunning Sony and the Wii-U, which is selling below Nintendo's projections. Microsoft has sold 76 million Xbox 360 consoles worldwide and has 46 million subscribers to the Xbox Live online service.

Worldwide the video game industry generated hardware and software sales of $37.4 billion last year, according to Gartner.

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